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Extended Tax Provisions: Are You Affected?

Towards the end of December 2015, Congress renewed a number of “extender” provisions that expired at the end of 2015. These provisions may affect some individuals and businesses. Extended individual provisions include:

  • $250 educator expense deduction: Made permanent, and adjusting for inflation going forward, teachers can claim this deduction for supplies they’ve purchased for their classrooms.
  • Tuition and fees deduction: Reduce the amount of your income subject to tax by up to $4,000 of qualified education expenses incurred. This provision was extended through December 31, 2016.
  • Itemized deduction for state and local general sales tax: Made permanent, this option is valuable to taxpayers who don’t pay state and local income tax.
  • Itemized deduction for mortgage insurance premiums (PMI): A PMI policy is coverage paid for by the homebuyer, but it protects the lender in case of default on the loan. This provision was extended through December 31, 2016.
  • Qualified principal residence indebtedness exclusion for debt discharge income: Applies to most homeowners who default on their loans, and prevents the forgiveness of debt from being included as income on the tax return. This provision was extended through December 31, 2016,
  • Section 529 education plans: now allow expenditures for computers, peripheral equipment and software. These tools must be used primarily by the beneficiary during years of academic study.
  • The American Opportunity Credit. Made permanent, this credit covers up to $2,500 of education expenses and was set to expire in 2018.
  • Charitable distributions from IRAs: are now permanently tax free. Taxpayers age 701/2 (or older) can make up to $100,000 of annual charitable contributions from an IRA. These contributions are not included as income, nor are they deductible as charitable contributions

Written by Esther Phahla

Esther Phahla is a Certified Public Accountant and Certified Tax Coach in Temecula. She also holds a Masters of Science in Taxation. She is the Best Selling Co-Author of a Tax Planning book “Why Didn’t My CPA Tell Me That”. She can be reached at (951) 514-2652.

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